IBM misses Q3 sales estimates, casting doubt on growth engines

Bloomberg

International Business Machines Corp missed analysts’ quarterly revenue estimates, ending a short-lived streak of sales gains and casting doubt on its strategy to boost growth through new businesses like cloud and artificial intelligence. The shares slip-ped in extended trading.
Revenue fell 2.1 percent to $18.8 billion in the third quarter, while analysts were expecting $19.1 billion. Cloud revenue, which has become a key metric to watch, grew 10 percent in the period to $4.5 billion. That was slower than the 20 percent expansion in the second quarter. Profit, excluding certain items, was $3.42, IBM said in a statement, compared with the average projection of $3.40 a share, according to data compiled by Bloomberg.
After six years of declining sales, the 107-year-old company showed gains in the past three quarters. Those were largely due to its legacy mainframes, the massive computers that help power global financial transactions and other complicated calculations for businesses
and governments.
A new sales cycle for those computers, launched about a year ago, is now winding down and the newer businesses IBM has been counting on to spur future, sustainable growth — known as “strategic imperatives” — have expanded over the past three years, but have yet to fulfill their promise. The group includes IBM’s Watson artificial intelligence program, security software and cloud computing.
In the third quarter, revenue from strategic imperatives rose 13 percent for the past 12 months to $39.5 billion. That was a slower 12-month growth rate than the 15 percent reported in the previous quarter. IBM shares fell 4.7 percent to $138.25 in extended trading. They have declined 5.4 percent this year, compared with a 5.1 percent gain in the Standard & Poor’s 500 Index.